The CEO of the world’s largest gold mining corporation, Goldcorp, believes that “peak gold” is either imminent or already been passed. “Peak gold” is the point at which gold mining and gold mine discoveries have reached their peak, with only declines in production expected in years to follow.
In an interview with the Wall Street Journal, Chuck Jeannes, the chief executive for Goldcorp said, “Whether it is this year or next year, I don’t think we will ever see the gold production reach these levels again. There are just not that many new mines being found and developed.”
A drop in supply and new mine discoveries will of course, strengthen the price of gold. Typically, higher prices equal larger margins for miners and lead to an increase in mining operations, but if peak gold has truly been reached, the mining of the metal will become much more difficult as all of the easy-to-mine gold has already been extracted.
Gold production has been rapidly increasing over the past 40 years, with 2,270 metric tons mined in 2013, but even with the increase in production, new discoveries have fallen to nil. In 1995, there were 22 new discoveries with deposits of at least two million ounces of gold. In 2010, there were six. In 2011, there was one, and in 2012, there were none.
Mr. Jeannes predicts there will be more industry consolidation as the costs for mining increase due to the increasing difficulty in extraction. Last year, Goldcorp tried to acquire Osisko Mining Corp with a cash-and-stock takeover, but the deal was defeated by a rival bid. Mr. Jeannes stated that this led many investors to wrongly believe Goldcorp is in the market for an acquisition. “There is a sense that because we attempted to buy Osisko and didn’t we are standing poised with our gun loaded and ready to shoot, and it’s just not the case.”
Some investors were also wondering if this would lead to Goldcorp buying out the controlling stake in their Dominican Republic mine, Pueblo Viejo, an operation co-owned by Barrick Gold Corp, but Jeannes says that having a partner in such large projects helps to mitigate risk. He predicted more joint-projects with large scale operations, especially in those countries that are politically unstable.
“We are at the cusp at being able to realize the huge investment over the last four years,” Jeannes said. “We are looking forward to having higher production, lower costs and our capital spending dropping off.”